Health Care’s Retail Solution

• Health–Wealth Managers. Consumer-directed health-care players have focused so far on simply managing health-asset transactions. But as CDHPs gain more traction, health savings accounts will combine with the larger world of wealth management to form an entirely new industry. Financial-services players are likely to dominate, but cobranded alliances with health plans could be powerful. Within this arena, customer service and product innovation — such as offerings that tie in disability and long-term-care insurance — will be critical for success. This convergence of health-care benefits and broader financial services will potentially involve hundreds of billions of dollars and will spark new thinking about the nation’s savings behavior and lifelong wealth creation and management.

At this early stage, it may be tempting to think that there will be one answer in each of these three arenas and that fast followers will be disadvantaged. A more likely scenario is that segmented plays will thrive, each catering to different demographics, diseases, life stages, and wealth levels. Still, the battle for critical intermediary positions will be intense — in part owing to the large financial opportunities, but also because the intermediary role gives suppliers critical access to target customers. How that pie will be divided is still up in the air, but it’s clear it will be shared differently than it is today.

The Competitive Environment
As a market maker and an enabler of change, government plays a vital role in creating the right environment for a more transparent and competitive retail marketplace. But for that environment to function well, federal and state regulations and laws need to enable, not hinder, competition and innovation.

Many of the conditions that helped spark the latest health-care industry product innovations were put in place after the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. This bill and subsequent policy clarifications by the Internal Revenue Service allowed for the creation of portable and tax-advantaged CDHPs and HSAs. The legislation resembles the 1978 law that enabled the creation of 401(k) accounts.

The federal government, however, cannot reshape the marketplace on its own. Many of the current barriers to competition and product innovation exist at the state level. For the most part, unless employers are self-insured and therefore regulated under federal Employee Retirement Income Security Act (ERISA) employment laws, the states regulate health insurance. Most states mandate which benefits must be included in employer-sponsored insurance plans. These benefit mandates limit product innovation and make the cost of health insurance higher for those companies that are too small or that lack the know-how to self-insure. Employers cannot obtain a no-frills, high-deductible package.

Some states also oversee the construction or renovation of health-care facilities, and even regulate the purchase of high-end medical technology, such as MRI scanners. Although the original intent was to ensure that any region’s health needs were met and to prevent excess supply, the oversight process has become politicized. It tends to protect existing players’ interests, discourage new entrants and innovations, and limit options for consumers, thus reducing competition.

Finally, state laws governing the licensing of clinical professionals also retard the development of new care-delivery models. Although some regulation is necessary to ensure safety, regulations often restrict tasks that other licensed clinicians can perform. For example, in some states, only licensed radiology technicians can perform certain diagnostic tests, even if nurses or others with related skills could be adequately trained to perform these activities as part of a team-based approach. Other state mandates governing staffing ratios and minimum lengths of stay for certain procedures attempt to improve patient safety but also inhibit providers from improving the delivery of care while protecting the jobs of those who helped craft the regulations. For the health-care market to more efficiently and more creatively meet the needs of consumers, these kinds of obstacles need to be lifted.

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